What Is Cyber Insurance?
Cyber insurance policies, also known as “cyber liability insurance” or “cyber risk insurance,” are financial products that allow businesses to transfer costs involved with recovery from cybersecurity attacks, breaches, and other similar events. Typically, the most critical aspect of cyber insurance is network security coverage. This type of coverage will respond to network security failure incidents such as malware, data breaches, ransomware attacks, email compromises, etc. However, the policy also responds to liability claims and ancillary expenses of a break or attack. In most cases, the policy also provides access to a panel of top-tier data breach coaches and other IT service providers.
Who Needs Cyber Insurance?
We strongly encourage businesses of all sizes and industries to consider the value of cyber insurance, especially if they handle or use any digital information. Does your business store client data on any computer system both on or offline, such as names, credit card information, addresses, social security numbers, and more? If so, there’s a regulatory obligation to keep all of that data secure, subsequently meaning a higher price in the event of a cyberattack.
Many people are often surprised to learn the true costs associated with a breach. Based on our research, cyberattacks cost small businesses upwards of $2.235 million, and attacks only become more severe and sophisticated each year.
Does it sound like your business may need coverage? Tell us more about your organization and the IT pain points you often struggle with, and one of our IT experts will help get you back on the right track.
Additionally, if your small business revenue stream happens to have any contact with European consumers or businesses, then the General Data Protection Regulation (GDPR) most likely applies to you. Many US businesses have already implemented measures to be GDPR compliant, but that doesn’t necessarily mean your insurance has followed suit.
Why Do You Need It?
Simply put, traditional business insurance policies weren’t created to cover the risks associated with cyberattacks and breaches. Therefore, many insurance experts tend to argue that cyber insurance policies are still in an infancy stage. Much work needs to be done in terms of standardizing coverage and ensuring that insurance carriers can support the needs of modern businesses. Along with that, education is crucial for small businesses to understand the severity and implications of cyberattacks. The sad thing to recognize is many companies lack a quality security strategy, meaning they’re highly vulnerable.
With that said, there’s no doubt that cyber insurance will continue to grow rapidly, and offers will be both expanded and customized. Also, cyber insurance policies are moving towards more industry-specific solutions and becoming much less generalized.
What Does Cyber Insurance Cover?
Cyber insurance is as flexible as the companies it protects, meaning it’s far from being standardized. However, there are some issues that cyber insurance will typically cover, such as:
- Data loss, recovery, and recreation
- Loss of transferred funds
- Computer fraud
- Cyber extortion
- Loss of revenue due to a cyber breach
Important Note: Errors and omissions insurance isn’t cyber insurance and will not serve as a substitute for proper insurance coverage. If hackers steal personal information, such as driver’s license number, social security, addresses, bank information, etc., a cyber insurance policy will pay for:
- Notification Costs
- Credit Monitoring
- Civil Damage
- Computer Forensics
- Reputational Damage
Cyber insurance providers also have a responsibility to defend policyholders from liability lawsuits or administrative actions. For example, cyber insurance offers privacy liability coverage, which is essential for most companies, especially those that store customer and employee information on their business networks. Breaches that expose this type of information compromise those affected and expose your business to liability lawsuits from victims of the incident. Also, it provides coverage in cases where you are alleged to have violated any privacy laws. Most policies will also provide resources that can help policyholders design cost-effective security and data encryption protocols.
What Isn’t Covered?
Like most coverages, there are specific exclusions that cyber insurance doesn’t typically cover. The policy won’t respond if you’re sued for any vulnerabilities in your systems before breaches occur. More notably, cyber insurance policies usually don’t reimburse for future profits lost due to data breaches or cyberattacks. If you’re fearful of losses due to theft of your intellectual property, you’ll need to search for a specifically tailored intellectual property insurance policy. Additionally, any allegations that the policy holder’s patent violates, those of a third party also will not be offered coverage.
If an agent of foreign power causes the breach, the coverage can also be denied under the acts of war exclusion. Alongside that, the cost to improve your technology systems and security after an attack is typically not included in most policies. Most traditional insurance policies, particularly general liability insurance (CGL), weren’t designed with cyber breaches and risks in mind. This means that CGL policies typically won’t cover cyber liability, and if they do, it’s very minimal. It’s important to mention that social engineering attacks can be considered a special case. These types of attacks rely on psychological manipulation to gain access to sensitive information or funds.
Does Cyber Insurance Have a Deductible?
Like most coverages, cyber insurance does have a deductible, and you can select the amount of your deductible when securing coverage. A deductible is a fixed amount of funds that you’ll have to pay before coverage kicks in and starts paying, and it’s applied each time your cyber insurance covers a loss. If you aim for a higher deductible, you’ll secure lower premiums.
What is the Cost of Cyber Insurance?
When it comes to the cost of cyber insurance, it’s best to shop for the type of insurance instead of the exact price. Your business’s sophistication, coverage limit, and ability to avoid incidents are the most significant factors in determining premium costs, along with revenue and the number of unique PII or PHI records stored on the insured systems.
Still in Doubt?
As entrepreneurs, it’s your responsibility to stay up to date on the latest and greatest technology trends. Remember, in modern times like these, everything is becoming more technologically focused. That’s why it’s important to have IT professionals in your corner who can offer guidance and insight.
You have a massive pool of IT professionals out there to choose from. But, finding people with the perfect blend of certifications, skills, integrity, and availability is far from easy. You may spend endless hours trying to weed through candidates, and trial-and-error can become quite an expensive hiring strategy.
At Parried, we understand that while IT is undoubtedly an integral part of your business, maintaining its integrity should be in the background while you tend to your company’s primary needs. We are a trusted technology growth partner that seeks win-win relationships with our clients. If you still have lingering questions or concerns about cyber insurance or outsourcing your IT, learn more about our managed IT services and how we can help grow your business.